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Consumer protection codes and mortgages

Introduction

Lending institutions such as banks and building societies are bound by two
statutory codes of conduct in relation to mortgages. These are the Central
Bank's Code of Conduct on Mortgage Arrears (CCMA) and its Consumer Protection
Code 2012.

Local authorities operate under similar rules. For people having difficulty
repaying local authority loans, two pieces of legislation, along with a set of
guidelines, provide for the local authority to make arrangements to deal with
the situation - (see ‘Local authority loans’ below).

Code of Conduct on Mortgage Arrears
(CCMA)

The Central Bank’s Code
of Conduct on Mortgage Arrears (CCMA) has been revised and the new version
came into effect on 1 July 2013. This is the main code of relevance to people
whose mortgage is in arrears or in danger of slipping into arrears.

The CCMA requires mortgage lenders to adopt specific procedures when dealing
with borrowers experiencing arrears and financial difficulties. Such procedures
must be aimed at helping you as far as possible in your own particular
circumstances.

In general, the CCMA requires lenders to wait 8 months before taking legal
action about mortgages in arrears. However, this requirement does not apply if
a borrower is deliberately not co-operating with the lender - see below.

Regardless of how long it takes your lender to assess your case, and
provided that you are co-operating, you must be given 3 months’ notice before
they can commence legal proceedings where either:

Your lender does not offer you an alternative repayment arrangement for
your mortgage

Not co-operating

The revised CCMA expands the definition of ‘not co-operating’ with the
lender. You may be classified as not co-operating if you:

Do not fully and honestly disclose significant information or

Fail to provide relevant information within a reasonable time or

Are in arrears for three months, during which you either failed to
contact the lender or respond to its communications, or your response is
insufficient for a complete assessment of your circumstances or

Have entered an alternative repayment arrangement and three months have
passed, during which you have not fully made the alternative repayments
or

Have not entered an alternative repayment arrangement and three months
have passed, during which you have not fully paid your mortgage or have not
cleared your arrears

Before classifying you as not co-operating, the lender must write to you,
giving you 20 business days to take specific actions to enable it to assess
your circumstances. It must warn you about the implications of not co-operating
and suggest that you seek appropriate advice. It must also highlight the
position about debt outstanding after repossession or sale.

If you are classified as not co-operating, you lose the protections of the
MARP and your lender may commence legal proceedings immediately. Before you can
be classified as not co-operating, your lender must first write to you and warn
you that this might happen and tell you what steps you need to take to avoid
being classified as not co-operating. You may appeal the decision to classify
you as not co-operating.

Scope of CCMA

The CCMA applies to mortgages on primary residences only. It defines primary
residence to include “a residential property in this State which is the only
residential property owned by the borrower” as well as the more common
definition of “the residential property which the borrower occupies as
his/her primary residence in this State” (your main home).

The purpose of this wider definition is to apply the protections of the CCMA
to people who are trying to maximise their income to help pay the mortgage on
their main residence or home, whether or not they actually live in it.

The Code also covers borrowers in pre-arrears. It defines pre-arrears as
follows: "A pre-arrears case arises where the borrower contacts the lender to
inform them that he/she is in danger of going into financial difficulties
and/or is concerned about going into mortgage arrears".

The CCMA applies to all regulated mortgage lenders operating in the State
when dealing with borrowers facing or in mortgage arrears on their primary
residence, including any mortgage lending activities outsourced by these
lenders. It does not apply to credit unions or to local authorities (see
‘Local authority loans’ below).

The CCMA sets out the framework that lenders must use when dealing with
borrowers in mortgage arrears or in pre-arrears. It requires lenders to handle
all such cases sympathetically and positively, with the objective at all times
of helping people to meet their mortgage obligations.

Under the CCMA, lenders must have the following:

A Mortgage Arrears Resolution Process (MARP) to be used
when dealing with arrears and pre-arrears customers. The 4 steps for the
MARP are:

An internal Appeals Board to consider appeals from
borrowers in relation to ASU

Lenders must also:

Ensure that communications with borrowers are presented in a clear and
consumer-friendly manner and that the level of communications from the
lender, or any third party acting on its behalf, is proportionate and not
excessive, taking into account the borrower’s circumstances

Not make unnecessarily frequent communications

Ensure that communications with borrowers are not aggressive,
intimidating or harassing

Ensure that borrowers are given sufficient time to complete an action
they have committed to before follow-up communication is attempted

Make an information booklet available to borrowers in arrears (or
pre-arrears) including details on the MARP, relevant contact points for
arrears issues and details of websites with mortgage arrears information,
such as mabs.ie and
keepingyourhome.ie

Provide a dedicated section on their website for borrowers who are in or
facing financial difficulties. This section must include the above booklet
and links to the above websites

Wait at least 8 months before applying to the courts to commence legal
action for repossession of a property (this does not apply if the borrower
is not co-operating with the lender)

Lenders must not:

Require a borrower to change from an existing tracker mortgage to another
mortgage type as part of an alternative arrangement offered to the borrower
in arrears or pre-arrears, unless none of the options that would allow the
borrower to retain the tracker interest rate are appropriate and
sustainable for the borrower’s individual circumstances.

If this is the case, the lender may offer the borrower an alternative
repayment arrangement which requires the borrower to change from an existing
tracker mortgage to another mortgage type provided that:

An alternative repayment arrangement is affordable for the borrower,
and

It is a long-term sustainable solution which is consistent with Central
Bank of Ireland policy on sustainability

If you are not happy with the lender’s treatment of your case, or if you
feel they have not complied with the CCMA, you can complain to the lender under
the Central Bank’s Consumer Protection Code 2012 - see below.

Consumer Protection Code 2012

The Code includes requirements setting out how regulated entities must deal
with and treat consumers who are in arrears on a range of loans including
credit cards, personal loans and buy-to-let mortgages. It does not apply to
mortgages on a primary residence – these are covered by the Code of Conduct
on Mortgage Arrears, described above.

The Consumer Protection Code requires lenders to seek to agree an approach
that will assist a consumer in dealing with an arrears problem.

The Code also provides that the lender must:

Have in place written procedures for handling arrears and make
information available to you to assist you in dealing with arrears

Where your account remains in arrears ten business days after the arrears
first arose, immediately contact you to find out the reason for the
arrears

Ensure that the level of contact and communications from them, or from
any third party acting on their behalf, is proportionate and not
excessive.

Lenders must not:

Initiate more than 3 unsolicited communications with you, by whatever
means, in a calendar month, other than correspondence required by the CCMA
or other regulatory requirements. (This limit does not include missed calls
or engaged numbers.)

The Consumer Protection Code 2012 replaces the original Consumer Protection
Code, which came into effect in 2007.

Local authority loans

Section
11 of the Housing (Miscellaneous Provisions) Act 1992 provides that the
local authority may make such monetary arrangements with you as it considers
equitable to take account of your particular circumstances. In effect, this
means that, if you are having problems making your repayments, you should
approach the local authority to see if you can make an arrangement to
facilitate you paying over a longer term or to restructure the repayments in
some other way.

The Housing
(Miscellaneous Provisions) Act 2009 provides that where you owe money to a
local authority either for rent or loan repayments and the local authority is
satisfied that you would otherwise suffer undue hardship, it may make an
arrangement with you to repay by instalments. This section (Section 34) is in
effect with respect of loan repayments since 14 June 2010 but not in respect of
rent.

Contact Us

If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.